XIIIth AIDA WORLD CONGRESS PARIS 2010 Reinsurance Working Party “Conflicts of interest faced by reinsurance brokers: the modern role of the broker and his duties.” Dr Kyriaki NOUSSIA LL.M, Ph.D

1. Introduction Insurance, Reinsurance law Broker - agent of assured or reinsured - owes insured/reinsured fiduciary and contractual duties.

1. Introduction (cont.) HIH Casualty & Gen. Ins. Ltd v JLT Risk Solutions Ltd [2006]Lloyd’s Rep. I.R. 493  brokers who had expressly undertaken  to forward to their reinsured management reports of a third party  also owed a duty to alert and advise the reinsured  of any breaches of warranty by the assured.

1. Introduction (Ctd.) HIH Casualty & Gen. Ins. Ltd v JLT Risk Solutions Ltd [2006]Lloyd’s Rep. I.R. 493 sparked concerns across insurance & reinsurance world encompassed presumption post-placement duty to alert insured/reinsured as to any coverage concerns applies not only in unusual circumstances.

1. Introduction (Ctd.) HIH Casualty & Gen. Ins. Ltd v JLT Risk Solutions Ltd [2006]Lloyd’s Rep. I.R. 493 Back-to-back context, Brokers - should discuss with insured before sending information to reinsured, - be alive to potential for conflict - seek advice if concerned.

1. Introduction (Ctd.) Similarly Broker = not only agent of insured also agent of insurer for certain also agent of insurer for certain duties. duties.Thus > agency relationship of double character (broker - performs functions also for (broker - performs functions also for insurer) insurer)

2. Ongoing Information Duty of the Broker  Rule - responsibility to advise on operation of policy - responsibility to advise on operation of policy Sarginson v Moulton (1942)73 Ll.L.R. 104; Sarginson v Moulton (1942)73 Ll.L.R. 104; Strong & Pearl v Allison & Co (1926) 25 Ll.L.R. Strong & Pearl v Allison & Co (1926) 25 Ll.L.R. 504; 504; King v Chambers & Newman [1963]2 Lloyd’s Rep. King v Chambers & Newman [1963]2 Lloyd’s Rep. 130; 130; Victor Melik & Co Ltd v Norw. Un. Fire Ins. Soc. Victor Melik & Co Ltd v Norw. Un. Fire Ins. Soc. [1980] 1 Lloyd’s Rep.523 [1980] 1 Lloyd’s Rep.523

2. Ongoing Information Duty of the Broker (Ctd).  Rule (cont.) - no general duty to monitor activities or insurance needs of assured while policy subsists - no general duty to monitor activities or insurance needs of assured while policy subsists BUT BUT - duty of care may be owed - duty of care may be owed HIH Casualty & General Ins. Ltd v JLT Risk Solutions Ltd [2006]Lloyd’s Rep. I.R. 493 HIH Casualty & General Ins. Ltd v JLT Risk Solutions Ltd [2006]Lloyd’s Rep. I.R. 493

3. HIH Casualty & General Ins. Ltd v JLT Risk Solutions Ltd.  Held First instance Breach of continuing post-placement duty Continuing post-placement duty > to alert HIH to any potential issues of coverage Not enough > for JLT to ONLY to pass on risk management reports management reports

3. HIH Casualty & General Ins. Ltd v JLT Risk Solutions Ltd (Ctd). Court of Appeal -upheld the Commercial Court judgment in all respects -whether broker owed duty of care to insured post-placement, & scope of duty, had to depend on the circumstances of the case

3. HIH Casualty & General Ins. Ltd v JLT Risk Solutions Ltd (Ctd.)  Commentary (Ctd). Arguable: - post-placement duty to alert insured re coverage issues applies not only in unusual circumstances, BUT across the board

4. Obligations of Broker to the Insurer Agency duty -owed by broker to insurer -entailed in functions brokers perform -unquestionable a)if broker does not bring conflict of interest b)if assured has given full informed consent to broker acting in such function to broker acting in such function Excess Life Ass. Co Ltd v Fireman’s Fund Ins. Co of Newark NJ [1982] 2 Lloyd’s Rep. 599s Excess Life Ass. Co Ltd v Fireman’s Fund Ins. Co of Newark NJ [1982] 2 Lloyd’s Rep. 599s Pryke v. Gibbs Hartley Cooper [1991]1 Lloyd’s Rep Pryke v. Gibbs Hartley Cooper [1991]1 Lloyd’s Rep. 602.

4. Obligations of Broker to the Insurer Where insurance broker:  duty to report facts to underwriter  failure to report = detrimental

4. Obligations of Broker to the Insurer Practical operation of London Ins. Market Brokers > carry out functions for both parties of ins. transaction parties of ins. transaction [The Zephyr] [1984]1 Lloyd’s Rep. 58

5. Other Jurisdictions Continental jurisdictions (Greece, Germany) Post-contractual information duties > regulated in complex of insurance contract law. Germany - s.6 § 1.1. Regulation on Duties of Information Relating to Insurance Contracts Relating to Insurance Contracts Greece Insurance Law, Civ. Code, art. 224 et seq.

5. Other Jurisdictions (Ctd). German Law - broker has information duty pre-contractually pre-contractually - bears post-placement information - bears post-placement information duty duty - bears all duties that any representative would - bears all duties that any representative would have under general contract law have under general contract law (§ 181 BGB, §19 VVG). (§ 181 BGB, §19 VVG). Also – duty to inform the insurer of any alteration in risk’s nature nature - obligation to collect the premium and payments on - obligation to collect the premium and payments on behalf of the insured. behalf of the insured.

5. Other Jurisdictions (Ctd).  Greek Law Insurer- broker relations:regulated mainly by: -Law 1569/1985 -Minister’s Decision (Min. for Commerce)K3/1377/ Presidential Decree 190/2006.

5. Other Jurisdictions (Ctd). Most usual obligation -de lege: payment of commission to broker by insurer for conclusion of task of effecting insurance contract task of effecting insurance contract Also usual: -by special separate contractual agreement, other obligations are being agreed other obligations are being agreed (e.g. collection of premium by broker on behalf of insurer, (e.g. collection of premium by broker on behalf of insurer, exact insurance risks undertaken by him & resulting duty of care owed to insurer way and amount of damages (may be) owed for breach of duty the way agreed for broker to give account for actions) exact insurance risks undertaken by him & resulting duty of care owed to insurer way and amount of damages (may be) owed for breach of duty the way agreed for broker to give account for actions)

6. Conclusions.  Arguable if post-placement duty to alert insured (coverage issues) applies always in all circumstances

6. Conclusions (Ctd). Re back-to-back insurance:  brokers to discuss matter with insured before sending information to reinsured before sending information to reinsured

6. Conclusions (Ctd). Traditional broker’s role - agent of assured Exception - brokers have also obligations vis-à-vis the insurer vis-à-vis the insurer

XIIIth AIDA WORLD CONGRESS PARIS 2010 Reinsurance Working Party “ Conflicts of interest faced by reinsurance brokers: the modern role of the broker and his duties.” Thank you for your attention !